Accounts receivable
The total money owed to a business by its customers for work already done.
Why it matters
The quality and aging of accounts receivable determines invoice eligibility, advance rates, and credit limit allocations across the factoring program. Receivables from creditworthy commercial debtors with clean payment histories qualify at higher advance rates. Old invoices, disputed amounts, or receivables from financially stressed customers reduce available funding. A business with a large receivables portfolio but concentrated in one or two customers faces concentration limits that restrict how much of that portfolio can be funded at any time.
How it appears in contracts
In factoring, accounts receivable are the primary collateral. The UCC-1 filing by the factor creates a security interest in all accounts, not just those submitted for funding. Factoring agreements define accounts receivable broadly to include not just invoices but also contract rights, customer credits, and proceeds. This breadth means that even receivables the seller did not submit for factoring are covered by the factor security interest during the term of the agreement.
Related terms
Related reading
Sources
- International Factoring Association - International Factoring Association. Accessed 2026-05-19.
- Secured Finance Network - Secured Finance Network. Accessed 2026-05-19.